Government Overrules OGRA to Keep Gas Prices Steady, Raises Rates for Captive Power Plants
Despite a recommendation from the Oil and Gas Regulatory Authority (OGRA) to reduce gas prices by 10% for the upcoming fiscal year, the government has decided to maintain current gas prices across all categories, except for Captive Power Plants (CPPs). This decision, effective from July 1, comes in alignment with directives from the International Monetary Fund (IMF) and aims to address fiscal requirements.
No Reduction in Gas Prices
Starting July 1, gas prices will remain unchanged for most consumers, contrary to OGRA’s proposed 10% decrease. The decision reflects the government’s strategic focus on fiscal stability and revenue generation amid ongoing economic challenges.
Increased Rates for Captive Power Plants
In a significant policy shift, the government has decided to increase the gas price for Captive Power Plants (CPPs) in two phases:
- Phase 1: From July 1, 2024, the gas price for CPPs will rise by Rs 250 per MMBTU, increasing from Rs 2750 to Rs 3000 per MMBTU.
- Phase 2: An additional increase of Rs 700 per MMBTU will be implemented from January 1, 2025, bringing the total price to Rs 3700 per MMBTU.
These adjustments are part of the government’s compliance with IMF directives, aiming to generate additional revenue and meet fiscal targets.
Economic and Fiscal Implications
Senior officials from the Ministry of Energy indicated that maintaining the current gas prices for categories other than CPPs will help balance economic stability and revenue needs. By focusing the price increase solely on CPPs, the government expects to generate additional revenue of Rs 110-115 billion for the next fiscal year.
A spokesperson from the Ministry of Energy stated, “The decision to keep gas prices steady for most consumers is aimed at protecting households and general industries from price shocks while targeting revenue needs through a phased increase for CPPs. This approach helps in managing fiscal requirements effectively.”
Impact on Captive Power Plants
For CPPs, the phased price increase represents a significant change in operational costs. The immediate Rs 250 increase per MMBTU from July 1, followed by a Rs 700 increase from January 1, 2025, will impact cost structures for industries relying on captive power generation. This change is expected to push CPPs to reassess their energy strategies and manage operational budgets accordingly.
Future Considerations
While the current decision maintains stability in gas pricing for most consumers, the government remains committed to evaluating economic conditions and regulatory recommendations. Future adjustments will be considered based on fiscal needs and market dynamics, with ongoing assessments to balance economic and consumer interests.